SEC NEWS DIGEST

Issue 2013-118June 20, 2013

Commission Announcements

Commission Meetings

Closed Meeting on Thursday, June 27, 2013 at 2:00 p.m.

The subject matter of the Closed Meeting will be: institution and settlement of injunctive actions; institution and settlement of administrative proceedings; consideration of adjudicatory matters; and other matters relating to enforcement proceedings.

At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact the Office of the Secretary at (202) 551-5400.

ENFORCEMENT PROCEEDINGS

Commission Charges China-Based Company and CEO in Latest Cross-Border Working Group Case

The Securities and Exchange Commission (Commission) today charged a China-based company and the CEO with fraudulently misleading investors about its financial condition by touting cash balances that were millions of dollars higher than actual amounts.

The case is the latest from the SEC’s Cross-Border Working Group that focuses on companies with substantial foreign operations that are publicly traded in the U.S. The Working Group has enabled the SEC to file fraud cases against more than 65 foreign issuers or executives and deregister the securities of more than 50 companies.

The SEC alleges that China MediaExpress, which purports to operate a television advertising network on inter-city and airport express buses in the People’s Republic of China, began falsely reporting significant increases in its business operations, financial condition, and profits almost immediately upon becoming a publicly-traded company through a reverse merger. In addition to grossly overstating its cash balances, China MediaExpress also falsely stated in public filings and press releases that two multi-national corporations were its advertising clients when, in fact, they were not. The company’s chairman and CEO Zheng Cheng signed the public filings and attested to their accuracy. After suspicions of fraud were raised by the company’s external auditor and an internal investigation ensued, Zheng attempted to pay off a senior accountant assigned to the case.

“Investor confidence in the representations made by publicly-traded companies is critically important to the proper functioning of our financial markets,” said Antonia Chion, Associate Director in the SEC’s Division of Enforcement. “China MediaExpress and Zheng falsely reported whopping increases in its cash balances and deceptively raised money from stock sales. Today’s action demonstrates the Commission’s commitment to policing financial fraud in the U.S. markets, regardless of whether it is perpetrated by persons who live here or abroad.”

According to the SEC’s complaint filed in Washington D.C., China MediaExpress became a publicly-traded company in October 2009 and began materially overstating its cash balances in press releases and SEC filings. For example, its 2009 annual report filed on March 31, 2010, reported $57 million in cash on hand when it actually had a cash balance of merely $141,000. Later that year on November 9, 2010, China MediaExpress issued a press release boasting a cash balance of $170 million at the end of the third quarter of its fiscal year. The actual cash balance was just $10 million.

According to the SEC’s complaint, after China Media materially misrepresented its financial condition, its stock price tripled to more than $20 per share. At the same time, China Media received $53 million from a hedge fund pursuant to a sale of the company’s preferred and common stock to that fund. Zheng was financially incentivized to misrepresent China MediaExpress’ financial condition, as he had agreements to receive stock if the company met certain net income targets. For instance, when China Media met net income targets for fiscal year 2009, Zheng personally received 600,000 shares of China MediaExpress stock that were worth approximately $6 million at the time.

According to the SEC’s complaint, China MediaExpress’ external auditor resigned in March 2011 due to suspicions about fraudulent bank confirmations and statements. The company’s audit committee then retained a law firm to conduct an internal investigation. The law firm hired a Hong Kong forensic accounting firm to assist in obtaining bank statements from China MediaExpress’ banks to verify the publicly reported cash balances. The evening before a planned visit to the banks by the accounting firm’s team, Zheng called a senior accountant assigned to the team and told him that he had the authorization letters necessary to obtain China MediaExpress’ bank statements. He asked the accountant to meet him alone to obtain the authorization letters. During the meeting, Zheng admitted that there would be discrepancies dating back one to two years between China MediaExpress’ reported and actual cash balances. Zheng offered the accountant approximately $1.5 million to “assist with the investigation.” The accountant refused the offer. Approximately one month later, the bank statements were obtained, and they showed substantial discrepancies between publicly reported and actual cash balances.

The SEC’s complaint charges Zheng and China MediaExpress with violations of the antifraud provisions of the federal securities laws. The complaint charges China MediaExpress with violations of the reporting, books and records, and internal control provisions, and charges Zheng with violating the SEC’s rules prohibiting lying to auditors and making false certifications required under the Sarbanes-Oxley Act. The complaint seeks financial penalties, permanent injunctions, disgorgement, and an officer and director bar against Zheng. (Press Rel. 2013-115)

An Administrative Law Judge issued an Order Making Findings and Revoking Registration of Hellenic Solutions Corp. by Default (Default Order) in The Hartcourt Companies, Inc., Admin. Proc. File No. 3-15128. The Default Order found that: (1) the Division of Enforcement achieved service on Hellenic Solutions Corp. (Hellenic Solutions) in Greece; (2) Hellenic Solutions had securities registered pursuant to Section 12(g) of the Securities Exchange Act of 1934 (Exchange Act); and (3) it had violated Section 13(a) of the Exchange Act and Exchange Act Rules 13a-1 and 13a-13 by failing to file required periodic reports with the Securities and Exchange Commission. Based on these factual findings, the Default Order found that revocation of the registration of each class of each of Hellenic Solutions' registered securities was both necessary and appropriate for the protection of investors. (34-69815; File No. 3-15128)

Commission Declares Decision as to David E. Ruskjer Final

The Commission has declared final the decision of an administrative law judge permanently barring David E. Ruskjer from associating with a broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent, and nationally recognized statistical rating organization. The initial decision found that on September 26, 2011, Ruskjer was found guilty in a jury trial of sixteen counts of mail and wire fraud in violation of 18 U.S.C. '' 1341 and 1343, two counts of structuring financial transactions in violation of 31 U.S.C. ' 5324(a)(3) and (d)(2), and twenty-two counts of money laundering in violation of 18 U.S.C. ' 1957. United States v. Ruskjer, No. 1:09-CR-249-HG (D. Haw). He received a 120 month prison sentence and was ordered to pay $11,586,334.85 in restitution. The initial decision also found that on September 28, 2012, Ruskjer was permanently enjoined by a federal district court from future violations of Sections 5 and 17(a) of the Securities Act of 1933 and Sections 10(b) and 15(a) of the Exchange Act and Rule 10b-5 thereunder. SEC v. Ruskjer, No. 1:09-CV-00237-HG (D. Haw.).

Ruskjer, while doing business as Ruskjer & Associates, operated a Ponzi scheme between September 2004 and December 2008. He sold and offered to sell promissory notes that would purportedly pay fixed monthly interest rates ranging from 3% to 5%. During the course of the four year period, he misappropriated nearly $5.5 million from investors and raised approximately $16 million through fraudulent means. Neither Ruskjer nor Ruskjer & Associates were registered brokers.

The law judge held that Ruskjer's misconduct was egregious and recurrent and he has offered no assurances against future violations nor has he recognized the wrongful nature of his conduct.

An Administrative Law Judge issued an Order Making Findings and Revoking Registration by Default (Default Order) in Sunrise Solar Corporation, Admin. Proc. File No. 3-15281. The Default Order finds that Sunrise Solar Corporation has securities registered with the Securities and Exchange Commission (Commission) pursuant to Section 12(g) of the Securities Exchange Act of 1934 and it was necessary and appropriate for the protection of investors to revoke the registration of each class of its registered securities because it failed to file required periodic reports with the Commission. (Rel. 34-69803; File No. 3-15147)

SELF-REGULATORY ORGANIZATIONS

Immediate Effectiveness of Proposed Rule Change

A proposed rule changed filed by BOX Options Exchange LLC to amend BOX Rule 3150 (Reports Related to Position Limits) (SR-BOX-2013-30) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of July 1st. (Rel. 34-69802)

A proposed rule changed filed by The NASDAQ Stock Market LLC to amend Rule 4120 to adopt a modification in the process for initiating trading of a security that is the subject of an initial public offering on NASDAQ (SR-NASDAQ-2013-086) has become effective pursuant to Section 19(b)(3)(A) of the Securities Exchange Act of 1934. Publication is expected in the Federal Register during the week of (Rel. 34-69801)

SECURITIES ACT REGISTRATIONS

The following registration statements have been filed with the SEC under the Securities Act of 1933. The reported information appears as follows: Form, Name, Address and Phone Number (if available) of the issuer of the security; Title and the number and/or face amount of the securities being offered; Name of the managing underwriter or depositor (if applicable); File number and date filed; Assigned Branch; and a designation if the statement is a New Issue.

Amendments to the Registrant's Code of Ethics, or Waiver of a Provision of the Code of Ethics

5.06

Change in Shell Company Status

6.01

ABS Informational and Computational Material.

6.02

Change of Servicer or Trustee.

6.03

Change in Credit Enhancement or Other External Support.

6.04

Failure to Make a Required Distribution.

6.05

Securities Act Updating Disclosure.

7.01

Regulation FD Disclosure

8.01

Other Events

9.01

Financial Statements and Exhibits

8-K reports may be viewed in person in the Commission's Public Reference Branch at 100 F Street, N.E., Washington, D.C. To obtain paper copies, please refer to information on the Commission's Web site at http://www.sec.gov/answers/publicdocs.htm. In most cases, you can view and download this information by using the search function located at http://www.sec.gov/edgar/searchedgar/companysearch.html.